’s latest Audio Interview, “Mexico’s Automotive Supply Chain and Opportunities for Suppliers”,  features Ms. Alba Peña, VP Sourcing & Supply Chain for Grupo Prodensa. Throughout the interview, she identifies some of the main obstacles that Mexico faces in supply chain as well as the different quality controls that Mexico suppliers have implemented. She also compares the average production costs between Mexico and the United States and their production capacity.

As of today, most of foreign direct investment (FDI) in Mexico comes from multinational corporations in the automotive industry. According to a BBVA study, Mexico is the world’s seventh largest producer of automobiles and it will soon become the fifth.  This projection is based on the commitment from twelve different automakers to invest in Mexico between 2013 and 2020, with the current total of above $20 US billion. According to Ms. Pena, in the last 30 years, Mexico has evolved from oil dependency to an industrialized export-oriented economy. The automotive industry has become one of the pillars for industrialization accounting for around 12% of total exports.   It is important to mention that other industries such as aerospace in the state of Sonora have contributed to Mexico’s manufacturing supply chain transformation. This transformation into an industrialized export-oriented economy has created a savvy technological workforce as well as clusters across states benefiting all types of industries.

Ms. Pena identifies several gaps in the supply chain in certain commodities principally electronics. She attributes this gaps mainly to costs compared to other countries such as China. Because of economies of scale, China is able to produce them at a much lower cost. However, labor intensive manufacturing has a comparative advantage due to labor costs as well as the proximity of Mexico to the United States.  Challenges for companies that want to start a supply chain manufacturer in Mexico reside on services. Mexico is associated with expensive and inefficient energy and telecommunications services.  However, the Energy reform passed in 2013 by Congress aim to provide more efficient, cleaner, at a lower cost and safer energy.  On the other side, the reform on Telecommunications promotes transparency, more competition for providers and lower costs for consumers. This benefits not only suppliers but consumers and entrepreneurs who want to enter the market.

When it comes to quality control, Mexico suppliers meet the standards. As Ms. Pena points out, “It is very easy to find world class suppliers in Mexico… they understand they need to implement ISO 9000, ISO TS, ISO 14000 in order to serve the international market”. She doesn’t identify quality standard as an issue but as a characteristic of Mexican suppliers.

Finally, Ms. Pena gives advice on establishing business with Mexican partners. For Mexicans, it is crucial to meet in person in order to  develop a relationship of trust. It is very helpful to take some time and go and meet your suppliers rather than a phone call or e-mail. Getting to know the facilities of the suppliers as well as your business partners will develop a solid partnership for the future.

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